The Electric Utility Industry is deregulating through the divestiture of generation assets from the vertically integrated local utility companies. Historically, the local electric utility company owned and operated all components of generating and delivering electricity to its end use consumers through a regulated franchise agreement. These franchise agreements were regulated by individual state public utility commissions which oversee the operations, costs, and revenues of the local utility in order to ensure fair pricing among various ratepayers and the reliable delivery of electric service to all ratepayers.
Deregulation of the industry has dramatically changed the role that the local utility plays in providing energy to its end use consumers. In addition, new entrants to the marketplace have the ability to provide specific energy services that were not available or allowed in a regulated electric utility environment.
Deregulation has required that the Local Electric Utility Company or Local Distribution Company (“LDC”) divest and sell its generation assets (“Power Plants”) in a competitive auction. New entrants are allowed to competitively bid and purchase power plants in service territories where they traditionally had no market presence. With new entrants owning & operating power plants, they possess the ability to sell power at the wholesale and retail market level. Both options create opportunities for the power plant owners to provide electricity to end-users. The primary market barrier for new power plant owners to enter into and provide retail energy to end users is the inability to acquire detailed load profile information on a real-time basis.
The metering architecture that exists in the field today is geared toward providing only enough information to accurately bill consumers on a monthly basis for energy consumed. Because the industry was regulated, and service provided by a monopoly, energy use was billed based on “average” rates and prices. In the deregulated environment, the price of competitive electricity, generated by individual power plant owners, changes on an hourly basis based upon changes in supply and demand.
While technology continues to advance, the focus of various metering technologies and manufacturers continue to be more so on the efficiency by which data is collected (for billing purposes) and not necessarily for end-use energy management purposes.
For individual end users, the price of energy (generation component) in a regulated environment remained relatively consistent over the course of a day or month. This was due to the fact that the local utility had 100% of the market through a franchise agreement with the state regulatory body. Individual user's energy profiles were grouped together into an aggregated portfolio of all users resulting in the averaging of electricity generation prices. Capacity charges were used to penalize those who used energy during costly peak periods of the day. These capacity or demand charges remain with the regulated utility and continue to be charged as part of the LDC's transmission and distribution cost recoveries. For the competitive generation supplier, usage patterns by end users are no longer being charged on an “average” rate per kilo-watt hour. Pricing is derived on an hourly basis depending upon supply and demand requirements.
The lack of a real-time “centralized” energy communications, monitoring, and data collection system provides a significant barrier to the maturation of the competitive electricity generation industry. Competitive generation suppliers lack the ability to receive real-time load profile information of its customer “portfolio” or the aggregated real-time hourly use patterns.